August 18, 2022
August 18, 2022
Outside counsel are often called in to help with a bet-the-company lawsuit, only to find out that the company is unprepared for litigation—employees not trained on how to preserve attorney-client privilege or properly escalate a dispute, litigation hold notices not issued and company data not preserved, and the location of key documents uncertain. Preparing for the proverbial rainy day is critical, and corporate directors play an important role in ensuring their company is ready for litigation.
Very few people enjoy talking or even thinking about litigation. Nevertheless, litigation preparedness is an important element of an effective corporate risk management plan.
Directors should ensure that corporate officers and company employees have taken the necessary steps to prepare the company for litigation. Companies should institute a litigation preparedness program before potential disputes or lawsuits arise to minimize the disruption and high cost associated with litigation and maximize the chance of a desirable outcome. Best practices for litigation preparedness really boil down to four things (what we call a “Four Ts” model): talk, think, train, and track. We explain what we mean by each of these below.
A litigation preparedness program requires internal communication among employees, departments, offices, and regions. Employees must understand what to do when a dispute is on the horizon, or a lawsuit comes in the door. Coordination across departments and regions is also critical to ensure a consistent approach that considers the contributions of all relevant business functions and litigation considerations that may be unique to particular regions. With advance communication and planning, company leadership and employees will be well positioned to move promptly to de-escalate disputes or respond to litigation. Some key considerations include:
It is equally important that management thinks in advance about how disputes will be resolved and what documents and testimony the company needs to handle a case effectively. Considerations include:
Litigation response training is very important. This includes teaching employees who manage commercial relationships, who handle data and documents, and who are most likely to be the first to receive word of a complaint or lawsuit how to respond to litigation threats, mitigate litigation risks, and escalate disputes early so that they can be considered in a strategic way and not as purely commercial issues.
Litigation can present special challenges that are unknown to many employees. Even for those more familiar with litigation procedures, a threat or anticipation of litigation can be intimidating, and ongoing litigation can be distracting to ordinary business operations. Employee training ensures that your team is better equipped to properly respond to disputes and threats of litigation and is aware of best practices during the course of litigation. Training can be done in-house (which is usually more cost-effective) or by outside counsel. Topics generally include confidentiality, preserving the attorney-client privilege, media and public relations, document preservation obligations, and other issues.
The best way to prepare for the next dispute is to learn from prior experiences, including any assessment of how previous disputes could have been avoided. These lessons should be incorporated into the company’s training and communications program. This requires tracking litigation outcomes and assessing what circumstances and company practices have triggered litigation in the past.
It is equally important to track what is happening in your industry. Baker McKenzie’s Litigation Intelligence Tool and Litigation Intelligence: Ready for Anything? report allows directors and managers to assess their companies’ litigation readiness and how it compares with peer companies in the same industry and jurisdiction, as well as identify gaps in their preparedness plans. Staying attuned to the risks and litigation trends that are affecting peer companies, including competitors, and factoring the experiences of those companies into your litigation preparedness plan is critical to future success.
Jennifer A. Semko is a partner and cochair of the North America Commercial Litigation Group at Baker McKenzie and is based in the Washington, DC office.
Maria I. McMahon is the knowledge lawyer in the North America Litigation and Government Enforcement Practice Group, also based in Washington, DC.
NACD: Tools and resources to help guide you in unpredictable times.